Treatment of Telecom Spectrum under the Corporate Insolvency Resolution Process: A Case Comment

Written by Shivank Duseja, the author is a law student currently pursuing BBA LLB (Hons.) from Symbiosis Law School, Pune

State Bank of India v. Union of India and Ors.

Court: Supreme Court of India

Bench: Mr. Justice P.S. Narasimha and Shri Justice A.S. Chandurkar.

Date: February 13, 2026

SUMMARY OF FACTS

The Aircel Group entities Aircel Limited, Aircel Cellular Limited and Dishnet Wireless Limited (collectively, the corporate debtors) were granted telecom licences by the Department of Telecommunications (DoT) under Unified Access Service Licences (UASL). These licences were valid for 20 years and governed the terms under which the corporate debtors operated telecom services. Domestic lenders, including the State Bank of India, extended rupee term loan facilities aggregating to ₹13,729 crores. As security for these borrowings, the corporate debtors executed Indentures in favour of the lender. Further, in spectrum auctions conducted by the DoT in 2010, 2014, 2015, and 2016, corporate debtors acquired rights to use spectrum in the 900 MHz, 1800 MHz, and 2100 MHz bands by paying approximately ₹6,249.27 crores. Subsequently, the corporate debtors defaulted in payment of licence fees to the DoT. When the DoT initiated steps to recover these outstanding amounts, the corporate debtors initiated CIRP. The National Company Law Tribunal (NCLT), Mumbai Bench, admitted the application in respect of Aircel Limited and appointed Vijaykumar V. Iyer as Interim Resolution Professional (IRP). Post constitution of Committees of Creditors (CoC) claims were invited from all stakeholders. The DoT was invited to participate in the CoC meeting held on 06.06.2018 and subsequently filed its claims, asserting an amount of ₹9,894.13 crores toward Annual Licence Fees and Spectrum Usage Charges payable under the licence agreements.

A resolution plan submitted by UV Asset Reconstruction Company was approved by the CoC on 13.05.2019 and later sanctioned by the NCLT on 09.06.2020. Aggrieved by the approval of the resolution plan, the DoT challenged the NCLT order before the National Company Law Appellate Tribunal (NCLAT). The Supreme Court delivered its judgment Union of India v. Association of Unified Telecom Service Providers of India[1] raising eight questions which were duly answered by the NCLAT.Appeals and cross-appeals were filed challenging various findings and conclusions in the impugned order of the NCLAT.

ISSUE

Whether telecom service providers (TSPs), called upon to pay the license dues by the Department of Telecommunication (DoT), can invoke a moratorium on the basis of the voluntary corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC), for restructuring of their assets?

SUBMISSION FROM THE PETITIONERS

The Claimants submitted before the court that NCLAT had adopted inconsistent conclusions. The claimants stated that the spectrum usage rights are assets and the DoT is an operational creditor. The NCLAT erred in relying on the Tripartite Agreement and the spectrum trading guidelines, 2015, which led to the elevation of the rights of an individual operational creditor. The Tripartite Agreement and the Spectrum Trading Guidelines themselves recognise the transferability and encumbrance of such rights, subject to regulatory approval. The claimants placed reliance on section 238 of the code, citing that the code prevails over any inconsistent contractual or statutory instrument. The counsel also relied on the cases of K. Sashidhar v. Indian Overseas Bank [2]and Committee of Creditors Essar Steel India Ltd. v. Satish Kumar Gupta [3]to conclude that the NCLAT had exceeded its jurisdiction in imposing payment of “requisite dues” as a precondition for use or transfer of spectrum.

SUBMISSIONS FROM THE RESPONDENTS

The Respondents relied on Public Interest Litigation v. Union of India and Natural Resources Allocation, In Re, Special Reference No. 1 of 2012, to establish public policy in support of the NCLAT's findings and to state that Spectrum is a scarce and finite natural resource owned by the people of India. The respondents stated that the grant of spectrum under a licence does not affect a transfer of property or title. It confers only a limited, conditional and revocable privilege to use spectrum. The NCLAT, therefore, erred in treating spectrum usage rights as assets of the licensee. Respondents also relied on Section 4 of the Telegraph Act, 1885, stating that the Union has exclusive privilege to grant licenses. The licence, though contractual in form, emanates from sovereign statutory power and does not create proprietary rights. The respondents submitted that treating spectrum as an asset of the corporate debtor is inconsistent with the explanation to Section 18 and Section 36(4)(a)(iv) of the Code, which excludes assets not owned by the debtor and contractual arrangements conferring only a right of use. DoT dues such as licence fees and spectrum usage charges do not constitute “operational debt” under Section 5(21) of the IBC, as they arise from the grant of a sovereign privilege rather than from the supply of goods or services. The relationship between the Union of India and the telecom licensee is regulatory and sovereign in nature, not that of a commercial creditor and debtor. Treating such dues as operational debt would improperly allow insolvency proceedings to interfere with statutory and regulatory control over natural resources. The respondents submit that the right to use spectrum is a constituting asset of the TSPs; therefore, DoT would fall within the ambit of “financial creditor” under section 5(8). TSPs do not “own” spectrum either in law or in fact, nor do they have absolute possession. The respondents prayed that the combined effect of the Telegraph Act, public trust doctrine, judicial precedents, Tripartite Agreements and statutory exclusions under Sections 18 and 36 of the IBC unequivocally establishes that spectrum cannot form part of the assets of the corporate debtor capable of transfer during CIRP or liquidation.

FINDINGS

1. Nature of Spectrum and the Constitutional Framework Governing the Natural Resources

A. Spectrum as a Finite Natural Resource

The court relied on the Public Interest Litigation v. Union of India[4] the understanding spectrum states that it is a finite and non-renewable natural resource, with only a limited portion suitable for wireless use due to factors like propagation characteristics, interference, and technological limitations.

B. Concept of ownership over natural resources and its Constitutional Underpinnings

The court relied on Paras 74 and 75 of Public Interest Litigation v. Union of India[5], upholding that spectrum is a natural resource and that natural resources belong to the people, but the State legally owns them on behalf of its people. The court relied on M. C. Mehta v. Kamal Nath[6] to apply the doctrine of public trust, upholding that the spectrum as a natural resource of the nation is administered by the Central Government as a Trustee.

2. Statute, Policy and Contractual Framework Governing Spectrum Allocation, Licensing and Use

A. Statutory Framework of Spectrum

The court relied on section 4 of the Indian Telegraph Act, 1885, for statutory provisions regarding spectrum. The court upheld its interpretation of section 4 in Union of India v. Association of Unified Telecom Service Providers of India[7], stating that section 4(1) of the Telegraph Act shows the Central Government has the exclusive privilege on telegraphs. The court placed reliance on State of Orissa v. Harinarayan Jaiswal[8] holding that even if the government were a seller, it does not change the legal position once the right to deal with those privileges is conceded.

B. The Successive Telecom Policies including unbundling of licensing spectrum allocation

Until the early 1990s, telecom services in India were exclusively controlled by the Government. Economic liberalisation and the New Telecom Policies of 1994 and 1999 opened the sector to private players, shifting from a fixed licence-fee system to a revenue-sharing model based on Adjusted Gross Revenue (AGR). The court relied on Union of India v. Association of Unified Telecom Service Providers of India[9], establishing that the Telecom Regulatory Authority of India (TRAI) Act, 1997, created an independent regulator, where TRAI’s recommendations on licence terms are advisory, while the final decision-making power remains with the Central Government as licensor. Later reforms introduced unified licensing (2003) and, under the National Telecom Policy 2012, separated spectrum allocation from licensing while retaining government ownership and control. The Supreme Court affirmed that spectrum is a natural resource held by the State in trust, requiring the government to ensure fair value and compliance with licence conditions.

C. Spectrum Licenses and Contract

The court relied on Bharti Airtel Ltd. v. Union of India[10] to interpret the license agreement as a contract in the context of the Government parting with the privilege of dealing with spectrum under Section 4 of the Telegraph Act. The Supreme Court held that while the Union of India, as licensor, derives its powers from contracts and the Telegraph Act, its decisions must also comply with constitutional principles. The Government cannot act whimsically and must ensure public interest, rational conditions, and fair compensation. Any contractual terms, including licence extensions, must be interpreted consistently with constitutional and statutory obligations, they may be void as against public policy.

The court examined certain clauses of the licence agreement and concluded that the Licence Agreement leaves no manner of doubt that effective and pervasive control over the licence and spectrum vests with the Licensor, notwithstanding the licence's fixed tenure and the payment of consideration. The license does not confer an absolute right but merely a conditional and defeasible permission to use spectrum, which remains subject to statutory control under the Telegraph Act and the regulatory framework administered by TRAI.

D. Tripartite Agreement

The Tripartite Agreement between the DoT, telecom service providers (TSPs), and lenders was created to help TSPs obtain financing while protecting lender interests. It allows the telecom licence to serve as security and permits the transfer of the licence to a lender-identified buyer in case of default, subject to DoT’s final approval. Lenders cannot operate telecom services themselves, showing that the licence remains a regulated sovereign privilege rather than a freely transferable asset. In the event of default, assets may be transferred or sold, but the DoT retains paramount control and a first charge over the proceeds, with lender dues adjusted thereafter.

3. The Insolvency and Bankruptcy Code, 2016

The court relied on Swiss Ribbons (P) Ltd. v. Union of India [11]to understand the core objective of IBC. The court stated that the Insolvency and Bankruptcy Code (IBC) primarily aims to resolve and revive distressed companies rather than liquidate them. Its objective is to preserve asset value, keep the corporate debtor running as a going concern, and enable timely restructuring so that debts can eventually be repaid and economic value maximised. The Code is not merely a debt-recovery mechanism for creditors but a beneficial framework that protects the corporate debtor by separating it from its management, promotes entrepreneurship, safeguards stakeholder interests, and supports overall economic growth, with liquidation being a last resort.

A. Implications of Treating Spectrum as an Asset by TSPs/Corporate Debtor and the Financial Institutions

The court held that TSPs recognise spectrum licensing rights as intangible assets on their balance sheets in compliance with the Accounting Standards (AS) while declaring financial statements under section 129 of the Companies Act. The court held that spectrum rights are intangible assets under Accounting Standard 26 and Indian Accounting Standard 38, as they are identifiable, separable, and capable of being sold, transferred, or otherwise commercially dealt with. These rights arise from legal entitlement granted by the government and allow telecom service providers (TSPs) to generate economic benefits through telecom operations, raise financing, and exercise exclusive control over their use. Since they are expected to produce future economic benefits and their cost can be reliably measured, they meet the accounting criteria required for recognition as intangible assets in financial statements.

The court interpreted Section 18(f), 36(3) and 36(4) of the code, holding that the Interim Resolution Professional (IRP) must take control and custody of the corporate debtor’s assets, including intangible assets recorded in its balance sheet. However, the Explanation to Section 18 clarifies that assets owned by third parties, even if in the possession of the corporate debtor under trust or contractual arrangements, are excluded from such control.

Under the IBC, only assets over which the corporate debtor has ownership rights, whether in tangible or intangible form, are part of the insolvency estate. Although spectrum licensing rights may be recorded as intangible assets in financial statements, this does not establish ownership but only reflects control over economic benefits. Since no transfer of title in the spectrum occurs and the rights remain subject to licensing conditions, telecom service providers do not own the spectrum or its use rights. Therefore, spectrum licensing rights do not form part of the asset pool available for insolvency resolution or liquidation under the IBC.

Conclusion

The Court held that when two statutes appear to conflict, they must first be interpreted harmoniously if conflict remains, the special statute governing the subject matter prevails. The court relied on Embassy Property Developments (P) Ltd. v. State of Karnataka[12], in which the Court clarified that insolvency authorities under the IBC cannot interfere with the State's public law functions, particularly in matters concerning natural resources. The Court emphasised that IBC cannot be invoked to usurp or neutralise powers vested in the State under special statutes, nor can insolvency proceedings be used to compel the State to act contrary to its statutory obligations.

Applying this principle, the Court found that telecom laws such as the Telegraph Act, Wireless Telegraphy Act, and TRAI Act form a complete and exclusive legal framework governing spectrum, while the IBC deals only with insolvency resolution of companies. Since spectrum is a sovereign resource controlled by the State, insolvency proceedings cannot be used to alter or override telecom licensing rights, liabilities, or regulatory powers. Merely because spectrum can be treated as an “asset” on the basis of certain attributes, such as possession and usage, lease and assignment, claim and liability or credit and debt, the entirety of the telecom sector cannot be brought under the sweep of IBC. Thus, the court held that Spectrum allocated to TSPs and shown in their books of account as an “asset” cannot be subjected to proceedings under the Insolvency and Bankruptcy Code, 2016.

References

[1] Union of India v. Association of Unified Telecom Service Providers of India [(2020) 9 SCC 748]

[2] K. Sashidhar v. Indian Overseas Bank [2019 (12) SCC 150]

[3] Committee of Creditors Essar Steel India Ltd. v. Satish Kumar Gupta [2020 (8) SCC 531] 

[4] Public Interest Litigation v. Union of India [(2012) 3 SCC 1]

[5] Public Interest Litigation v. Union of India [(2012) 3 SCC 1]

[6] M. C. Mehta v. Kamal Nath [(1997) 1 SCC 388]

[7] Union of India v. Association of Unified Telecom Service Providers of India [(2011) 10 SCC 543]

[8] State of Orissa v. Harinarayan Jaiswal [(1972) 2 SCC 36]

[9] Union of India v. Association of Unified Telecom Service Providers of India [(2011) 10 SCC 543].

[10] Bharti Airtel Ltd. v. Union of India [(2015) 12 SCC 1

[11] Swiss Ribbons (P) Ltd. v. Union of India [(2019) 4 SCC 17] 

[12] Embassy Property Developments (P) Ltd. v. State of Karnataka [(2020) 13 SCC 308]